Economic woes slow health spending

The economic slump has put the brakes on health spending, which may bolster a conservative truism: When consumers become more sensitive to the cost of health care, they cut back.

Or maybe it supports a progressive one: Forcing consumers to have more “skin in the game” means they will cut back on needed care, not just elective or unnecessary care.

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And neither side can tell for sure yet whether people have changed spending patterns for good or just postponed seeing doctors or getting tests or treatment until the economy improves or they get too sick to wait any longer.

One thing is certain: Amid the recession and slow recovery, Americans have less to spend on health care and face bigger deductibles and co-pays. And the census reports that there are more than 5 million additional uninsured than in 2007, the year the recession began.

Health spending is still growing — but in these tough times, it’s growing at a notably slower pace. The annual rate for health spending growth was 6 percent in late 2007, according to the Altarum Institute. By 2009, the growth rate had bottomed out at around 3.5 percent.

Evidence suggests the slower growth reflects lower utilization. A recent analysis from the Kaiser Family Foundation found that even people with insurance are going to the doctor less frequently, with the number actually dropping most dramatically after the recession was technically over. Patients made 17 percent fewer doctor visits in the second quarter of 2011 than in the second quarter of 2009.

Spending is creeping up again in 2011 but is still less than some forecasters had expected and lower than recent pre-crash years.

For years, conservative health proposals have shared a common logic. Care for most Americans is financed by third parties — employers and taxpayers — so patients use services without worrying too much about what they cost. Both Sen. John McCain’s 2008 presidential campaign health insurance reform platform and House Budget Committee Chairman Paul Ryan’s recent Medicare voucher concept incorporated that view.

That logic has also driven high deductible health plans that are paired with tax-advantaged health savings accounts. They were championed by lawmakers, including Republican Rep. Bill Thomas, in the 1990s and expanded under President George W. Bush. Some conservatives’ vision for an alternative to the 2010 health care law would also spur more consumer-directed care along these lines.

If consumers have more “skin in the game,” the reasoning goes, they will spend health dollars more wisely.

And the response to the downturn shows that’s the case, says the Cato Institute’s Michael Cannon.

“Nobody likes that people can’t find jobs. But the way consumers are handling health care right now shows us that … individuals actually make more responsible [health care] decisions than governments do,” he said.